Sugar stocks turn bitter after changes in sugarcane pricing

Balrampur Chini Mills (down 6.12%), Shree Renuka Sugars (down 2.84%), Bajaj Hindusthan Sugar and Industries (down 2.67%), DCM Shriram Industries (down 2.36%), Triveni Engineering & Industries (down 2.35%), EID Parry (India) (down 1.02%), and Simbhaoli Sugar Mills (down 0.07%), declined.

The three-week-long protests by farmers from UP, which produces almost half the country's sugar cane, had hampered crushing. The Opposition party stalled the first two days of the winter session of Parliament over the sugarcane pricing issue.

This deadlock ended after the government agreed to make changes in the sugar pricing ordinance, though reports suggest that the underlying issue on pricing is yet to be resolved. The offending clause in the government's ordinance will now be dropped and the burden will shift to mill owners.

The government has said that SAP or the state administered price will prevail. While the Fair and Remunerative Price (FRP) is unlikely to be scrapped, the subsection 3(B) of the sugar ordinance which asked state governments to pay the difference between SAP and FRP is likely to be done away with. The difference now will be borne by the mills as was the earlier practice rather than the states.

The government had fixed the purchase price at Rs 129.84 a quintal for the current season. Farmers in UP are demanding a rate of Rs 280 a quintal, while sugar mills in the state have agreed to pay Rs 180-185.

Sugar output in Uttar Pradesh is likely to fall below estimates as the weakest monsoon in more than three decades has hit sucrose content in cane.